Managements use Porter’s Five Forces Model in scanning environmental components to aid in strategic management and market research in various industries. In most cases, companies use Porter’s Five Forces Model to ensure that they develop efficient market entry strategies in new markets. The essentiality of this paper is to analyze digital camera industry using the Porter’s Five Forces Model.
Rivalry among present competitors
Competition exists whenever there are two or more companies producing same products that they offer in a common market. The greater rivalry among firms in the market the less attractive it will be for both potential new firms and the current firms in the market. Currently, there is an intense competition in the digital camera industry. The common brands in the market include Sonny, Olympic, and Cannon. Each firm making digital camera incorporates unique features in its products to enable the firm gain an advantage over its competitors. The existing intense competition provides an unfavorable environment for both potential new firms and the current firms in the digital camera market.
Threat of new entrants into the industry
Threat of entry of new firms occurs whenever the market has firms that continuously rival each other’s moves to enable them prove their standing and outdo the other firms in the market. If there is an increased threat towards new potential investors, the industry will always be unattractive for new firms. Currently, the digital camera industry has a small threat on potential new entrants in the market since the industry is under the influence of extremely rapid technological changes. As a result, new investors will require tremendous financial support for research and development.
The bargaining power of suppliers
Availability of suppliers, existence of complicated terms of sale, and finally existence of increased prices often affect the purchasing power of suppliers. Markets having limited suppliers are unattractive since firms in such markets will have a greater bargaining power on the essential supplies of the industry. In digital camera industry, there is a medium bargaining power of suppliers. The industry has limited suppliers since the government has in place intense regulatory requirements on the supply of electronic products.
The bargaining power of buyers
The efforts of customers that aid them in obtaining quality products at reduced prices refer to the bargaining power of buyers. Suppliers and firms are less attracted towards industries that have customers with great bargaining power. As a result, such an industry will always be unattractive for business people. The buying power of consumers in the digital camera industry is medium. Consumer’s buying power in the digital camera industry is moderately unfavorable. In digital camera industry, customers have a variety of brands to choose from as they buy their products. Buyers can easily change from buying one product to the other.
The threat of substitutes
Buyers can easily change from buying original products when they consider buying substitute products to be comparatively more economical than original products. As a result, substitute products often hinder firms from marking maximum revenue from their products. In the end, they reduce on the sales income of the company. The higher the threat of substitute products the less attractive the industry will become. The threat of product substitution is high in the digital camera industry since many people prefer taking photographs from their cell phones. Film cameras also provide threat to this industry since many people have not forgotten film cameras.
It is evident that there is an intense competition in the digital camera industry since there are many strong firms offering different brands of digital cameras. According to Porter’s Five Forces Model analysis of digital camera industry, three forces out of the five are unfavorable. As a result, digital camera industry is unattractive at the moment.